Sales Tax Declining

Every month the Comptroller's Office sends out figures on sales tax collection across the state. The latest figures for the state were down 1.65 billion dollars for December 2009. That is an 11.6 percent decrease from a year ago. Sales tax revenue declined every month during 2009, except for the month of January.

Milam County sales tax was also down in 2009. During 2008 Milam County received $1,507,607.12 in revenue from sales tax, compared to $1,224,531.97 in 2009. This is a net loss of $283,075.15 in revenue to the county. Revenue that is dedicated to the reduction of ad valorem property taxes.

With the unemployment rate in Texas running 8.3% in December of 2009 it does not bode well for the future of sales tax revenues in Texas. Folks have to have a job to be able to spend so the state, counties and cities can collect the sales tax. No sales no tax.

Milam County will most likely see an increase in sales tax revenue for the months of February and March. Over 1,000 workers are being brought into the county for a shutdown. This will certainly help, but when the shutdown is completed the workers and their paychecks move on.

Bottom line is that unemployment and sales tax revenue are two indicators of the health of the economy. While many pundits say that we are moving into the recovery phase these two indicators do not necessarily agree.

Counties will not be as hard hit as the state. Texas depends on sales tax revenue to fund approximately 57 percent of the biennial budget. Big problem for the state is that what they predicted during the budgeting process in 2009 is off by almost 13% compared to the same time period last year.

In response to this projected shortfall all state agencies have been requested to find 5 percent that can be cut from their total budget. Agencies must reply to the request by February 15th. It is going to be interesting to see exactly what is cut.

The good news is that the counties will not be as severely affected by the decrease in sales tax revenue. Sales tax accounts for far less of a county's overall budget. The bad news is that if the economy does not turn around in the near future the overall economic decline will have an effect on counties across the entire state. If we get to that point it is going to be interesting to see what we cut.